A nasty surprise year-end revenue and profit warning for EMIS investors, drove them to slash 13% off its share price and downgrade FY13 expectations.
EMIS blamed a variety of factors for the expected full year miss - increased staff and recruitment costs and lower demand from its Australian defence contract, and training and integrated care services. On the conference call with management CE Sean Riddell said 2012 had proved to be a very busy year for EMIS and the NHS, with a new health minister, and major reorganisation taking place (see Hunt wants paperless NHS by 2018).
EMIS warned that adjusted group profits and revenue for the year ended 31 December will marginally miss analyst expectations. Headline revenue growth will however still be up an impressive 17.5%+ on last year to at least £86m, thanks to the accelerated roll out of EMIS Web and a strong performance from its pharmacy systems division RX Systems. Nonetheless this was £1m down on forecasts. Cash was also disappointing. EMIS ended the year with £7.7m vs. £8m in FY11. Meanwhile, capex doubled to £13m due to increased investment in hosting assets, computer equipment and the group’s new head office.
The increased recruitment and associated staff costs shouldn't come as a surprise given the amount of time and effort EMIS has been putting into accelerating the roll out of EMIS Web (see here). Year-end headcount had risen to 1,236 from 1,112 at half time. And this helped to more than double the installation rate of EMIS Web in H212 to 901 vs. 406 in H1. After taking into account practice mergers and closures, 38% of the EMIS English GP estate is now live with EMIS Web (1,635) vs. 8% at the start of 2012. There were also 1,252 unfulfilled orders for EMIS Web and 2,564 GP practices in the familiarisation service. So plenty more work to be done here in 2013.
Riddell said the Australian defence contract (in which it partners with CSC) was down to slower phasing of the software roll out, but he said this shouldn’t impact performance in 2013. EMIS said it is benefitting from CSC’s decision to withdraw iSoft from the primary care market in the UK. Riddell said this had proved to be something of a ‘googly’, and EMIS had responded with a ‘land grab’ taking on former iSoft clients. Unfortunately for EMIS it is the nasty surprises that get remembered.